Author: Will Canny, CoinDesk; Translated by: Wuzhu, Jinse Finance
summary
JPMorgan said in a report that stablecoin regulation poses a threat to Tether's dominance.
The bank said that complying with MiCA means Tether may have to change its reserve management strategy.
Tether responded to CoinDesk by saying, “JPMorgan analysts still appear to have a fundamental misunderstanding of how our industry works.”
JPMorgan Chase & Co. (JPM) said in a research note on Wednesday that increased regulation could pose a significant challenge to Tether, the issuer of the largest stablecoin, USDT, which has dominated the cryptocurrency market in recent years.
Stablecoins are cryptocurrencies that are usually pegged to the U.S. dollar, but also use other currencies and assets such as gold. USDT has a market capitalization of about $117 billion, more than three times that of its closest competitor, Circle’s USDC.
JPMorgan noted that Europe’s Markets in Crypto-Assets (MiCA) legislation stipulates that 60% of stablecoin reserves should be held in European banks.
“Given the composition of Tether’s reserves, complying with MiCA’s stringent requirements will likely require significant changes to its reserve management strategy,” wrote analysts including Nikolaos Panigirtzoglou.
Stablecoin issuers have previously come under regulatory scrutiny due to a lack of transparency into the composition of their reserves, the bank said, adding that “the new regulations will increase pressure on Tether to provide more detailed disclosures and audits.”
Failure to comply with these new rules could threaten Tether’s dominance in the stablecoin market, the report said.
Additionally, JPMorgan said that stablecoin legislation in the United States is still pending, but when it eventually comes, most likely in 2025, adoption is expected to increase, making cryptocurrencies more mainstream.
“Stablecoins that comply with U.S. regulations will benefit, while those that do not will be challenged, potentially leading to industry consolidation,” the report said.
However, Tether refuted JPMorgan’s arguments and said the company remains optimistic about how MiCA will affect the industry. A Tether spokesperson noted in a statement: “We recognize that the impact of these regulations will be felt gradually, affecting every stablecoin issuer. However, some aspects of the regulation pose challenges that may complicate the role of stablecoin issuers and increase operational risks for EU-licensed stablecoins. Tether firmly believes that stablecoin regulations must ensure an increase in security and not introduce systemic risks.”
The stablecoin issuer also criticized Wall Street firms like JPMorgan for their views on the digital asset industry. “JP Morgan analysts still appear to have a fundamental misunderstanding of how our industry works. Tether has been very open about our processes and risk management procedures, demonstrating that we are more secure, transparent, and reliable than traditional financial institutions themselves have been in recent years,” the spokesperson said.
The statement added: “While we are sure JPMorgan is envious of Tether’s profit margins and frantically trying to catch up in the crypto space, Tether remains committed to serving its 350 million customers around the world and shaping the future of money.”
